Carnival Cruise Lines is a company that gathers individual-level behavioral and demographic customer data. This case study depicts the challenges and issues that the company underwent in attaining such valuable data. It stresses the importance of such data in coming up with ways to improve its customer targeting and acquisition, customer retention, and customer profitability strategies.
Lynda M. Applegate; Robert J. Kwortnik; Gabriele Piccoli
Harvard Business Review (806015-PDF-ENG)
July 07, 2005
Case questions answered:
- How could Carnival Cruise Lines retain its customers?
- Can the company improve its services more? If yes, how?
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Carnival Cruise Lines Case Answers
Carnival cruise has aimed to compete in a single industry which is cruising vacations. To do so in 1972, Ted Arison merged with American travel services, purchased two aging Canadian liner ships for the carnival cruise lines, and refurbished them, changing their names as well to new names that go with modern time.
Though the business showed a loss at first, CCL adopted a strategy of attracting young and first-time cruises by offering affordable packages that turned out for more than 100% capacity and profits just a month later after the loss incurred in 1974.
The strategy adopted by CCL for affordable vacation packages includes great experience and airfare, luxurious restaurant services, nightclubs, and entertainment. So, it wasn’t just an affordable but an enjoyable experience as well.
Supporting all of this, CCL had the lead of being the first cruise line to advertise through multimedia, having a theme of “Fun Ship” that still prevails till now, was so attractive to cruisers, and gives CCL a competitive advantage over other cruise line companies that tried imitating the same strategy as well.
CCL strategy was mainly horizontal integration. CCL, from 1989 till 2009, had a number of Joint ventures and mergers with other cruise companies, aiming to grow their business and benefiting from the acquisitions made by these companies of others as well. The following are the major and main acquisitions and mergers adopted by CCL.
Since CCL was for affordable packages, it acquired Holland American lines known for more expensive cruises targeting older cruises, which were not the segment targeted by CCL. So that way, CCL has a new market segment with higher prices, hence higher profits.
Adding to this, CCL acquired Seabourn cruise lines, which are the fancy cruise lines and the top-notch in the cruise industry. Extending its scope and acquiring more market share, CCL acquired several other cruise lines, operating in different areas as the Mediterranean, Europe, and Asia, hence having full coverage of the whole world and all market segments.
CCL had an acquisition as well with a non-cruise company, which is Airtours, that owns hotels and airlines and helped CCL in other future acquisitions as well.
Airtours is an example of related business diversification, where the company operates in the tourism and travel but in a different way, which may help CCL in case of any drop in the cruise industry to still have a back-up, and not putting all the eggs in the same basket.
So, CCL’s position is a Star, having the highest market share in a growing business, which is the best position that any company could hold.
CCL’s strategy has a great impact on its cruise divisions, as, after the horizontal expansion, they adopted and acquiring lots of other cruise companies. Regarding the coverage, now CCL operates in the whole world.
Besides the North & South Americas, they operate in the Mediterranean, Europe & Scandinavian countries and Asia, taking into consideration Tenerife as well.
In terms of the market segments, now CCL has targeted people with different demographics. First, it targeted youth cruisers with moderately priced vacations. Then after its acquisition of more premium and luxury cruise lines, it attracted older people regarding age and rich people who seek fancy experience in terms of financials.
Also, CCL was mainly targeting North America. Still, after that, it targeted the whole world, as mentioned earlier, serving the tastes of different people who want to visit different parts of the globe.
Finally, CCL has Yachts as well with considerably small capacity and extreme luxury. So that way, CCL could satisfy all the three categories that they identified as contemporary, premium, and luxurious, together with different age groups and different preferences in terms of locations and facilities.